An article yesterday in the Washington Post discussed how
the AARP uses its power to oppose cuts to Social Security and Medicare benefits
for retirees. Structural reform of these two entitlement programs is indispensable to taming the federal debt, but the political power of the AARP is a major
obstacle to reform:
But for lawmakers who would have to vote for such changes, AARP’s 37 million members and $1.3 billion budget are a force to be reckoned with. In the past eight months, AARP has sponsored a series of candidate debates, run television ads, circulated questionnaires and held more than 4,000 meetings around the country to mobilize its legion of supporters to oppose any cuts.
This article raised several important points related to
public choice.
Principal-Agent Problem: Last year the AARP’s top lobbyist
did not act in the best economic interests of the principals, the retirees,
when he expressed a willingness to consider benefit cuts to retirees. Many
interest groups, AARP members, and other retirees denounced him. The lobbyist
had to leave his job and the AARP reversed policy position, therefore ensuring that the agent acted in the best interests of the principal.
Interest Group Strength: The AARP is an example of the large
group that Olsen said is usually latent but is powerful if the constituents
mobilize. The AARP is very strong because it has many members and it because it
represents the interests of all retirees (through indiscriminate benefits and selective incentives).
Although Becker’s pressure function shows that large groups have strengths and
weaknesses, the AARP seems to have overcome the free rider problem to a large
degree. Retirees are very unified to exert strong pressure because of the
perceived threat to their benefits.
Opposing Interest Groups: Groups calling for entitlement reform are small and disparate In order to match the lobbying power of the AARP, they'll need to mobilize the younger generations – a tall task.
P.S. If you're looking to "keep your brain sharp," the AARP has resources for that too - lots of free games!
1 comment:
The AARP is far from the only interest group involving itself in the upcoming debt negotiations. Its "37 million members and $1.3 billion budget [will certainly be] a force to reckoned with," but this post underestimates the strength of the groups opposed to AARP's mission.
This past week President Obama met with business executives (for 90 minutes) who urged the President and lawmakers to "to prevent a year-end across-the-board tax rise that will go into effect unless Congress acts." The AARP may lobby in opposition to Social Security and Medicare cuts, but the business community is highly organized and publicly supports a balanced approach to deficit reduction. Groups like the Chamber of Commerce have the potential to suffer from principal agent problems just like the AARP. The benefits secured by the CoC's lobbying wing likely benefit firms across the board, not just members. Providing membership incetives may help to alleviate this problem.
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